Head of FX Strategy
Summary: The recent slow slide in sterling took on considerable energy today as noise from both the UK and EU side show no progress and Boris Johnson and his team seem willing to trigger a No Deal Brexit in defiance of Parliament. Elsewhere, the risk-off from the spike in Brexit concerns is hitting EM and the Scandies are also on the defensive with new breakouts lower versus the euro.
The FX Breakout Monitor is back, and it is expanded with "autosignals" that show examples of how to trade new breakouts, defined as new 19-day high or low closes not preceded by a breakout in the same direction in the prior week. Click on the link below for a look at the full PDF of the table overview and the Recent New Breakouts tables. See further below for a couple of chart highlights related to today's monitor.
Today’s Breakout monitor
We’re picking up a bit more energy around the edges of the Breakout Monitor in recent days, as the Scandies (SEK and NOK) have been taken to new 19-day lows versus the Euro and EURSEK closed at a new multi-year high for the cycle yesterday. And today, if sterling closes near where it is trading as of this writing, it will have also cleared a new 19-day low versus the euro and the yen that could prove the start of a significant breakdown.
The US dollar continues to keep its intentions unknown. USDCAD broke back higher recently, as we pointed out, nominally posting a new 19-day high, but so far having failed to clear the range. Elsewhere, the USD picture is generally muddled, though today we did see a significant move lower in EM as the sudden aggravation of Brexit worries and a headline that the White House is looking to eliminate Chinese stocks from government funds (federal pension funds?) doesn’t look like a good sign ahead of US-China talks set to start on Thursday. EM weakness was led by a steep TRY sell-off to a new 19-day high close yesterday after bellicose threats from Trump to “destroy and obliterate the Economy of Turkey” if Turkey made any move deemed wrong by the Trump administration in Syria. USDTRY is also threatening a new 49-day high today.
Today’s Breakout Highlight: GBPJPY
GBPJPY is poking below its 19-day low daily close of 131.84 today, trading below 130.50 at one point as concerns rise that we are headed for a hard, chaotic, No Deal Brexit at the end of this month after signals from both the UK and the EU that negotiations are leading nowhere at the moment. Note that the price action has taken us to the line that was the previous break-out line to the upside back in early September, which led to a very successful run higher for break-out traders.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
